How Farmers Respond To Climate-Related Risk

As climate change increases the frequency of drought, excessive rainfall, and other extreme weather events, farmers face growing uncertainty about crop production. Understanding how farmers perceive and respond to that uncertainty can help improve agricultural policy and climate adaptation strategies. A new study from the University of Illinois Urbana-Champaign and Michigan State University examines farmer risk preferences when dealing with climate impacts.

“Crop yields depend not only on weather conditions, but also on the producer’s management decisions. We wanted to better understand how farmers perceive uncertainty under changing climate conditions,” said lead author Natalie Loduca, clinical assistant professor in the Department of Agricultural and Consumer Economics, part of the College of Agricultural, Consumer and Environmental Sciences at U. of I.

The researchers surveyed crop producers in Michigan to gauge their level of risk aversion in general, and within specific agricultural contexts. Using a choice experiment commonly employed in economics, participants selected between paired scenarios with different levels of uncertainty and potential returns. The aggregate results from a series of choices were then analyzed to estimate each respondent’s risk preferences.